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Your employees keep your business running, day in and day out. But they don't do it for free. Employee compensation can be the most expensive annual spend for a business, but it's the most important.Determining which pay period is best for your employees and your business can be tricky. Check out the 4 pay period types below and what each could mean for you, your bank and your employees.
This type of pay period results in 52 paychecks a year, usually paid out every Friday.
The Pros: This is best for hourly employees in fields such as construction and manufacturing, as it fits their cash flow needs and is easier on their finances.
The Cons: Weekly payroll however can be expensive to process, and if you are processing manually, it doesn't provide you with a whole lot of turnaround time. This can lead to errors and additional costs to correct.
This schedule has 26 paychecks in a year and is usually distributed every other Friday.
The Pros: Great for hourly and salary employees and with a bi-weekly schedule, there may be years that result in additional pay periods. Also, according to the Bureau of Labor Statistics, 36.5% of privately owned businesses use a bi-weekly pay schedule. It's popular!
The Cons: Not a whole lot of cons here. This schedule is consistent, frequent enough for employees and doesn't cost a lot in terms of fees and processing. This may be your best bet!
24 paychecks in a year come with this pay schedule, checks cut on the 1st and 15th or 15th and the last day of the month. Usually, salaried employees are paid semi-monthly, but it works well for hourly workers too.
The Pros: It is very similar to bi-weekly and you have control over which dates the funds are released.
The Cons: Again, not many. This is a great option and the second most common.
This pay schedule will have 12 paychecks a year and is popular for salaried positions, such as state or federal employees, teachers, and public servants.
The Pros: Payroll typically gets distributed on the last day or at the end of the month, the cost to process is low and there are minimum implications for accounting and benefits.
The Cons: Clearly, this option is less frequent and that means it's not as popular with employees. It just doesn't fit the hourly employees cash flow needs. If you have more hourly employees than salary, this might not be the fit for you. However, if you have mostly salary- this may be something to look at.
Here are a few questions to consider when reviewing pay period options:
1. Are your employees hourly or salary? Or both? Most employers pay salaried employees on a monthly or semi-monthly basis and hourly employees on a weekly or bi-weekly basis. Some payroll systems allow for multiple pay schedules to cover both hourly and salaried employees. Some can even cut daily paychecks if needed. The beauty is, you don't have to pick one and hope you satisfy everyone. You can customize your pay periods to your employee needs and accommodate your own budget.
2. What are your state regulations? Federal and state laws also come into play when deciding on an appropriate pay period. The IRS doesn't regulate the frequency of pay periods, but some states do. Check with your state's department of labor for information on pay regulations.
3. What are the additional fees? As mentioned, depending on your payroll provider, there may be additional fees for processing paychecks. Obviously, with more frequent pay periods, you would be paying more. According to SurePayroll, on average, basic payroll processing has a per-employee or per-check fee, in addition to the base account fee. While base account fees vary from one software to the next, you can expect to pay anywhere from $20 to $100 per month, plus an additional $1.50-$5.00 per payroll run for each employee.
In the end, you need to choose a pay period or periods that work best for your business structure, your employees and your bank. Don't be afraid to ask questions and check out payroll processing services to help with the heavy lifting.
For information on payroll processing and fees for ONEMINT's WorkforceONE, schedule a live demonstration today. Our Implementation Specialist can walk you through our timekeeping payroll processing modules. Learn how you can save time and money with a streamlined payroll process.